5. Discussion and implementations
5.4 Initial marketing activities
the New Zealand wine. Supermarkets in China are the outlet for ordinary mass products at attractive prices, but selling at supermarkets requires high resource commitment and these supermarket provide no support with brand establishment. What is worse, they may even cheapen luxury products’
brands.
Distribution channel decisions have direct effects on wine transport logistics.
Logistics as a part of a supply chain, in turn have significant influence on companies’ cost (Wood, 1997). Different distribution channels have different impacts on logistic operation in terms of quantity of physical goods and real-time information flow. For example, volume distributed by a luxury hotel is most likely smaller than at a big high-quality and independent restaurants, so the unit cost of delivery could be higher. Orders from corporate consumers are large but they occur just several times in one year and are placed just before traditional festivals. In order to minimise cost but to meet demands of on-time delivery, wine producers need to be integrated with other partners in the supply chain (Kaufman, 1997).
with its functionality and relate to its physical aspect, such as taste or smell, quality. Extrinsic attributes are aspects that are related to the product but are not physically a part of it, such as its name or the brand image. Consumers with little wine knowledge tend to rate wine quality based on available extrinsic information rather than on taste (Balestrini & Gamble, 2006). In addition, the findings of the research show that wine drinking for most of Chinese consumers is outside the home at restaurants and for social purposes. When Chinese consumers choose an alcoholic beverage for consumption in a social situation, they generally focus more on quality, taste and the image of the drink.
The occasion and circumstances surrounding the consumption of the wine will influence the purchase decision (USDA, 1998; Yang, 1989). Spawton (1991) suggests that consumers use a variety of strategies to reduce the risk of making a bad purchase decision, such as selecting brand, utilising the peer recommendation, reliance on retail assistance, knowledge gained through wine appreciation education, as well as pricing and packaging and labelling.
With regards of characters to the characteristics of the New Zealand wine industry, the author identify brand, price, quality/taste, package/labelling and other promotion activities for success in marketing planning, implementation and control in China. Therefore, discussion and implementations are discussed in these categories.
5.4.1 Building strong New Zealand wine brands
A strong brand provides value by enhancing the customer’s interpretation/processing of information, confidence in the purchase decision and use satisfaction. It provides value to firm by enhancing efficiency and effectiveness of marketing programs, brand loyalty, prices/margins, brand extension, trade leverage and finally competitive advantage (Aaker, 1991).The findings of the research show that in China brand ranked the most important factor in wine selection. Without a strong brand influence, it is hard for new wine entrants to penetrate into and maintain position in this market. The reality
is that the market is dominated by domestic brands, such as Changyu and Great Wall, as they have invested considerable resources and time in this market. However, imported wine brands are generally recognized as better quality and accordingly higher price, especially French wine.
There are many studies and research on how to build and manage strong brands (e.g. Aaker, 1991, 1996; Donthu, 1994; Scherer & Ross, 1990).
Combined with the findings of the research, this paper examines the implications of brand establishment in terms of barriers, facilitators and suggestions. Barriers facing New Zealand wine to building strong brands are:
No presence in China market, so Chinese consumers know very little about New Zealand wine, despite its high quality and unique taste;
Brands from France enjoy a very high reputation amongst consumers. This is a disadvantage for New Zealand wine to compete with French producers and it forces New Zealand wine to give up extreme-top end market segment, at least at the beginning of its entry into the market;
The New Zealand wine industry knows very little about Chinese wine market and consumers and with long cultural distance to China,
However, there are several factors which facilitate the building of New Zealand wine brands. First, the high quality, unique cool-climate taste and high reputation in main wine markets (for example, the UK market), enable New Zealand wine potentially to establish a strong brand. Second, New Zealand in the Chinese mind is a clean, well protected environment and agriculture-developed country. This image is compatible with and supportive of the image of premium wine brands, consumers often use perceptions of a country’s image in product evaluation (Balestrini & Gamble, 2006). Third, rich experience in global market benefits New Zealand wine producers to explore Chinese market. Fourth, a rigorous focus on quality guarantees the quality of exported wine is fine and consistent (Winegrowers, 2005).
According to the findings, some valuable insights emerge for the brand establishment of New Zealand wine. Firstly, building brands in the China market should be an essential part of the long-term strategy of the New Zealand wine industry. Brand establishment requires time and resource. In addition, wine producers need to sell not just wine but also the image of New Zealand, life style of the Kiwi and an enjoyable experience, so that Chinese consumers perceive that drinking New Zealand wine is also a Western life style experience. Secondly, new entrants in the Chinese market need work together as a whole, a collective and cooperative ‘NZ Inc’ approach so the industry can gain critical mass (NZTE, 2006). If there is a bad event with just one New Zealand wine brand in Chinese market, then the reputation of the entire industry will inevitably be damaged, and consequently all are victims of the market loss. Thirdly, advertisement in mass media is not suitable for wine in this market. Respondents stated that targeted advertisements to senior managers, wealthy people and the middle-class could be more effective. For example, magazines in business or airline magazines detailed story of a brand including vineyards, history, ferment procedural and varieties of taste would have a positive impact. Finally, sponsorship or association governmental activities can be an effective and cost-saving way of brand building. Chinese governmental departments and officers have strong influence on consuming fashion, and they are also important consumers of premium wine. Their preference can direct the trends in the market.
5.4.2 Meeting Chinese wine consumers’ taste preferences
Wine taste is closely and positively related to perceived wine quality. The satisfaction obtained from taste enhances the consumers’ willingness to purchase. Perception of wine taste depends on individual experience; it comes out both subjectively and objectively (Balestrini & Gamble, 2006). Nowadays quality has become the rule rather than the exception, and wineries in almost every growing area around the world achieve objectively high qualities (Orth,
Wolf, & Dodd, 2005). Taste preferences of New Zealand wine drinkers are quite different from Chinese. Therefore, recognising, identifying these differences and then making needed adjustments in flavour are necessary when New Zealand wine plans to enter this market. The findings of the research indicate that dry red wine is the dominant in current Chinese market.
Sparkling and fortified wine have no place there. More detailed information on Chinese taste preference can be obtained through tasting. For example, 50 drinkers are invited to attend a promotion activity, to try a range of dry red wine without offering any information about price, alcoholic content, and then ask them to vote their favourites. Owing to the lack of wine knowledge and experience of Chinese consumers, New Zealand wines can influence consumer’s taste preference through wine appreciation education.
5.4.3 Setting right price level
Four product pricing strategies are offered and discussed by Kotler &
Armstrong (1999): premium strategy (producing a high-quality product and charging the highest price), economy pricing strategy (producing a good quality product but charging a low price), good-value strategy (High quality but at a lower price) and overcharging strategy (over price the product in relation to its quality, in the long-run, customers will likely feel ‘taken’, and it is harmful to firm’s reputation). What pricing strategy should be adopted depends on stage of product life cycle, demanding quantity of the market, firm’s producing capability, product position, competitors’ price and other factors associated with market situation and consumers (such as market geography, consumers’
emotional and social realization).
This research suggests the New Zealand wine industry should employ a premium pricing strategy in Chinese market. Firstly, New Zealand is a niche player in global wine market, relative small production of the New Zealand industry (0.2% of total world wine production, (NZTE, 2006) does not allow it to adopt the economy and good-value strategy, which require large supplies to
meet increased demands brought by lower price. Secondly, high quality, unique taste and reputation permit New Zealand wine to target top end customers, who pursue social and symbolic value with less price sensitivity.
Findings show that bills are mostly paid by governmental departments or business companies. Thirdly, premium pricing strategy benefits the establishment of strong brands. Price represents not only the monetary cost of an item but also a quality level for both brand and the product and, by reference, the satisfaction level to be expected (Erickson & Johansson, 1985).
Finally, a high price may signal that the wine is of superior quality especially in developing markets such as China where consumers are less accustomed to the complexities of different wine. A recent study by Lockshin & Horowitz (2002) investigated price as a cue of predicting the quality of Australian wine. It found a positive relationship between the price of a wine and its perceived quality.
With regards to the real situation in the Chinese alcoholic beverage market, where the market is dominated by spirits (Baijiu), French wine has very strong brand influence, and the suggested price range for New Zealand wine would be RMB200-400/bottle (NZ$40-80) at four/five-star hotels. Of course, quality of the exported wine must match this price. Super premium and premium wine should be exported to China. After strong brands are established, New Zealand wines can then considers extending products to increase market share.
5.4.4 Communicating New Zealand wine to Chinese consumers effectively
Factors such as quality (taste), brand, wine appreciation education, and price are discussed in above parts. The paper now outlines one key extrinsic and one situational factor needed to communicate New Zealand wine to Chinese consumers and then influence their wine selection behaviour.
Packaging and labelling
Findings of the research illustrate some preferences of Chinese consumers for
wine packing and labelling. Exporting bulk wine and re-bottled in China is found not suitable for New Zealand wine. Consumers assume that re-bottling will lower the quality, and that some traders will make use of chance of rebottling to mix low quality wine. Using a cork to seal bottle is better than using than metal cap. Dark colour is preferred for bottle.
Characters in the labels should be printed in high quality and in embassing.
The label should be traditional, classic and informative. Story, history, variety, style and producing year of the wine are preferred contents of label. Picture of vineyard are also welcomed.
The wine stewards
Corresponding with research (e.g. Aspler, 1991b-a; Green, 2003; Hochstein, 1994), respondents of hotel managers strongly believe that stewards have signification influence on wine selection and amount of consumption.
Manske & Cordua (2005) offer us a guideline on how to training stewards to become successful salespersons: adaptive and persuasive selling. Both techniques require thorough knowledge of the product in order to execute the sale successfully. Steward training involves knowledge of wine, allowing them to see, sniff and taste the wine they are servicing to help them to accurately describe the wine to their customers, and finally to make them credible in answering consumers’ questions. Adaptive selling technique refers through product knowledge, knowledge of customer, and knowledge of the wine use situation. Wine stewards can promote wine by tailoring their wine selling strategy to meet their customers’ needs. Persuasive selling technique is a behaviour technique that is used to persuade the customer that a particular product is the right product for them.
With the progress of understanding customer and accumulating experience in servicing them, the New Zealand wine industry will find more effective and accurate ways to communicate New Zealand wine to Chinese consumers.
Packaging and labelling will be produced with close attention paid to wine variety, producing area and quality in order to enable consumers to make a choice in less time and with more confidence. Armed with knowledge of New Zealand wine and sales, stewards can be an influential team to promote New Zealand wine brands and actual sales.